How much capital you requied in Forex market, Forex broker and Forex trading fees.

capital required for Forex market

We now have enough information to start formulating how much capital we need to trade Forex. We need all the above information because it helps to define our risk and profit potential.

Forex traders should not risk more than 2 percent on any single trade. Day traders should be risking 1 percent or less. Risk, in this case, is measured as the distance between the entry point and stop loss level (where a losing trade is closed out), in pips. This is multiplied by the pip value and the position size to attain the dollars at risk on the trade. That amount should be less than 1 percent of the account balance.

For example, if a trader is researching EUR/USD strategies and finds that they typically will need a 50 pip stop loss, that means they need to risk at least $5 per trade (50 pips x $0.10/pip x 1 micro lot).

If attempting to only risk 1 percent per trade, this trader needs at least $500 in there account ($5 x 100) because $5 is 1 percent of $500. This is the absolute minimum required for this risk level.

If the trader is willing to risk 2 percent on a trade, then they will need to deposit $250 ($5 x 50), because 2 percent of $250 is $5.
 
These sample calculations can be used to determine how much capital is required for the specific Forex strategy you are researching.

Whether day trading Forex or swing trading, starting with at least $500 is recommended. Starting with $1,000 or more is better, and starting with $3,000+ increases the chances of producing an income.


 Interest Rate Credits and Debits
Every currency has a home, and those homes (countries or zones) have different economic climates. Interest rates differ across the world and currency traders take part in this. If you buy euros and place those euros in a European bank, you will get a different interest rate than if you buy New Zealand dollars and place them in a New Zealand bank.

While Forex brokers don't typically charge interest on leverage (discussed above), each night Forex traders are debited or credited interest based on their currency positions.

If a trader has bought the NZD/JPY pair for example, and interest rates are 3 percent in New Zealand and 0.5 percent in Japan, the trader will receive a small interest payment into their account each day at 5 PM EST. If the trade was held all year, theoretically the trader would make 2.5 percent off the interest payments alone. On the flip side, if a trader sells the NZD/JPY, then they have sold NZD in favor of buying JPY, and therefore will be debited every day they hold the position. Over the course of the year, the negative interest rate will cost the trader approximately 2.5 percent. Note though, that interest rates are subject to change throughout the year.

If a trader is leveraged these interest differentials will be magnified. For example, if a trader deposits $1,000 and then takes a $10,000 position (1 mini lot) in this pair, they could see their account grow or decline by approximately 25 percent based on interest from credit/debit alone. This trade requires at least 10:1 leverage.

Also, keep in mind that the price of the actual currency is always fluctuating. On a daily basis, or even on a year basis, the interest credits/debits are likely to be relatively small compared to the gains or losses based on price movements.

Forex Brokers and Forex Trading Fees
There are Forex brokers all over the world. Since the Forex market is not highly regulated in certain regions, there are plenty of unscrupulous and ill-run brokers out there.

When searching for a Forex broker one of the primary things to look for is regulation and longevity. Ideally, the broker should be regulated in a major market such and the US, Great Britain, Canada, Australia, Japan or New Zealand, to name a few.

Brokers with a long track record are preferred over new brokers, as there are always new brokers popping up and many disappear just as quickly.
Also, consider what you are personally looking for from a Forex broker. Some traders are more concerned with fees and trading costs, while others are more concerned with customer support.

One major consideration when choosing a broker is the fees they charge. Most brokers don't charge fees for their trading platform or for receiving real-time prices/charts. Most brokers do charge a spread though (discussed above). Typically the lower the spread the better.

Many brokers only charge the spread, but don't have any other fees. Other brokers may charge a commission, but if they do the spread is usually much smaller. Day traders are typically better off paying the small commission for the reduced spreads, while swing traders and long-term traders should be able to do fine with a typical broker that has slightly larger spreads but no commissions.

Commissions and spreads vary by broker. Compare them, along with other criteria to find a broker that works for you.